Margherita Colangelo ‘Reverse Payment Patent Settlements in the Pharmaceutical Sector Under EU and US Competition Laws: A Comparative Analysis’ (2017) World Competition 40(3) 47

As its name indicates, this paper – which can be found here – compares the European and American approaches to pay-for-delay agreements – i.e. those agreements between an originator and a generics manufacturer where the former pays the latter to settle a patent injunction and agrees conditions to delay generic entry into the market. This payment goes against the standard expectation that a defendant in a patent suit would pay an IP-holding plaintiff to settle, but it is nonetheless economically rational for both parties: ‘the profit that the generic entering the market anticipates selling at a significant discount to the price of the brand-name product will be much less than the profit the brand-name drug company loses from the same sales applying the monopolistic price’. Settling the dispute eliminates the potential for competition and allows the parties to share profits that would otherwise be eroded by lower prices. The argument is that, while the case-mix on each side of the…

Jonas Severin Frank ‘Patent Settlements in Europe and the Lundbeck Case: A Competition Law and Economics Perspective’

This paper is part of a dissertation at the University of Marburg, and can be accessed  here. While it focuses on developing an economic perspective on the Lundbeck decision, it is fairly similar to the paper reviewed in the post above – except that it concludes that a presumption of illegality of reverse payments in patent settlements, and a safe harbour rule for agreements without reverse payments, should be adopted. The paper is structured as follows: First, it provides an overview of the patent settlement debate in the economics literature. This includes a review of various economics papers and models that identify when and how a reverse payment from the branded drug originator to the generic provider has the ability to delay market entry and, thus, harm consumers through longer periods of monopoly pricing. The whole debate flows from discussions on the probabilistic nature of patents – and was ultimately triggered by Shapiro’s work on how, under a consumer welfare…

Sven Gallasch ‘Activating Actavis in Europe – the proposal of a ‘structured effects-based’ analysis for pay for delay agreements’ (2016) Legal Studies 36(4) 683

This article – which can be found here – criticises the adoption of a ‘by-object’ approach in the EU for pay-for-delay agreements, and argues that Europe should instead adopt a test along the lines of the rule of reason approach delineated by the US Supreme Court’s decision in Actavis. This paper is structured as follows: Section 2 compares the EU and US regulatory frameworks. While broadly consistent with the papers above, this paper emphasises two points which merit attention. First, it is pointed out that the existence of a period of exclusivity for the first generic entry can, when coupled with the possibility of the generic supplier settling a patent validity claim with the branded drug originator, skew the incentives of the parties in favour of settlement to the disadvantage of final consumers. Instead of solving the patent dispute in court, the parties settle their dispute. The generic company is nonetheless granted the 180 days of generic exclusivity. The parties…

Michael A. Carrier and Carl J. Minniti III ‘Biologics: The New Antitrust Frontier’ (2018) University of Illinois Law Review 1

This paper – which can be found here – can be read together with the paper on biologics that was reviewed here. Biologics differ from small-molecule drugs along multiple axes. They are more expensive, costing hundreds of millions of dollars to develop. They also cannot be precisely replicated. As a result, they are likely to present different challenges than chemical generics. This article develops an antitrust framework for the problematic conducts most likely to arise. Part I provides a primer on biologics, offering a brief history before focusing on the relevant science and markets. In a nutshell, the pharmaceutical industry consists of small-molecule drugs and biologics. A biologic is a large, complex molecule derived from a living organism, most commonly a protein. Through an intricate manufacturing process, biologics are harvested in genetically modified cell lines and purified through complex, lengthy procedures. For most of the twentieth century, innovation resulted in small-molecule therapies in the form of compounds produced through chemical synthesis, up…

Michael A. Carrier ‘Sharing, Samples, and Generics: An Antitrust Framework’ (2017) Cornell Law Review 103(1) 1

This paper – which you can find here – looks at a specific type of obstacle to generic entry: refusals by originators to share samples of branded medicines. As is often the case in this sector, this practice takes advantage of the existing regulatory scheme, in this case in the US. This strategy involves risk-management programs known as Risk Evaluation and Mitigation Strategies (“REMS”). Pursuant to legislation, REMS are required when a drug’s risks (such as death or injury) outweigh its rewards. According to the author, brands have used this regime, intended to bring drugs to the market, to block generic competition. The paper is structured as follows: Part I provides a background on REMS, offering a history and overview of these programs before examining the concerns they raise regarding blocking generic entry. The FDA has defined REMS as “required risk management plans that use risk minimization strategies beyond the professional labeling to ensure that the benefits of certain prescription drugs outweigh…

Farasat Bokhari, Franco Mariuzzo and Arnold Polanski ‘Entry limiting agreements for pharmaceuticals: pay-for-delay and authorized generic deals’

This paper – which can be found here –  focuses on the incentives to enter into pay for delay agreements. A pay-for-delay deal involves a `reverse payment’ from a patent holder to a generic manufacturer (the challenger) seeking entry for its generic equivalent. In return for the payment, the generic firm may abandon its challenge, but often also acquires a right from the patent holder to enter the market at a later date, but before the patent expiration, as an authorized licensed generic with an exclusive license. The question is then, if the originator can pay the generic producer to refrain from challenging its patent and to stay out of the market for some time, how much do they have to pay, and why do other generic challengers not grab the same opportunity to also get paid off? The paper’s second section discusses the relevant literature. Section three develops a stylized game between a branded firm and several challengers seeking entry….

Kurt R. Brekkey, Chiara Cantaz, Odd Rune Straumex ‘Does Reference Pricing Drive Out Generic Competition in Pharmaceutical Markets? Evidence from a Policy Reform’ Discussion Paper Norwegian School of Economics 2015

This paper – which can be found here – conducts an empirical analysis of the impact of reference pricing on generic competition, and corresponding effects on drug prices, sales, and expenditures. A reference pricing scheme defines a maximum price that will be reimbursed by the insurer for a set of drugs with similar therapeutic effects. Consumers can purchase a drug priced above the reference price, but will then have to pay out-of-pocket the difference between the reference price and the actual drug price. The goal of reference pricing is to curb pharmaceutical expenditures by increasing demand elasticity and stimulating price competition between drug producers.  Reference pricing has become widely used. In Europe, almost every country has now introduced reference pricing schemes for off-patent drugs. In the US, reference pricing is a well-established practice through the Maximum Allowable Cost programs that are used by Medicaid and some managed-care programs to reimburse multi-source compounds. The impact of reference pricing on generic entry depends…

Fiona M. Scott Morton and Lysle T. Boller “Enabling Competition in Pharmaceutical Markets’ Hutchins Center Working Paper #30 (May, 2017)

This paper – which you can find here – argues that the pharmaceutical industry in the US has managed to disable many of the regulatory mechanisms that promote competition. The paper focuses on the incentives’ structure that enables the persistence of high prices, and its goal is to identify measures that will make US pharmaceutical markets competitive again. The author identifies three major barriers to effective competition in U.S. pharmaceutical marketsi. I. Obstacles to entry of biosimilars Over the past two decades, pharmaceutical innovation has shifted from chemically-synthesized small molecule drugs toward more complex, bioengineered treatments grown from living tissue that are known as biologics. While biologics carry a high price tag, many were licensed in the 1990s or early 2000s – which means that prices are high despite the relevant patents having expired. It is held that this is a consequence of regulatory barriers to competition being higher in biologic drug markets than elsewhere, resulting in fewer competitors and allowing…

Sandra Marco Colino, Niamh Dunne, Knut Fournier, Sofia Pais, Derek Ritzmann ‘The Lundbeck case and the Concept of Potential Competition’ (2017) Concurrences n° 2-2017

This paper – which can be found here – contains the reflections of a number of legal scholars about European decisions regarding reverse settlement payments (also known as “pay for delay” agreements). Reverse settlement payments consist of payments by the owner of IP rights to entities that are challenging such rights in court – and they are particularly important in the pharmaceutical sector, where producers of generic drugs may challenge the IP of branded drugs, and the owner of the drug may pay the generics’ company not to challenge his/her/its IP (and, thus, not to enter the market). As noted in the introduction: “Schemes of this nature are bound to set off alarm bells in the mind of the antitrust erudite. Delaying the entry of would-be competitors would almost certainly entail pushing back the benefits typically derived from a competitive market, the very ones that competition law was designed to protect. And yet the fact remains that, when reverse payment agreements are entered…

Patrick Actis Perinetto and Natalia Latronico ‘The Bitter Medicine: Competition Law and Parallel Trade in the Pharmaceutical Sector’ (2017) World Competition 40(10 93

This article – which you can find here – is a rather straightforward piece on restrictions on parallel trade of pharmaceutical products as a competition law infringement. It begins by analysing the most relevant features of parallel trade in the pharmaceutical sector. In Europe, a prohibition of restrictions on cross-border trade under EU competition law is coupled with the fact that the main purchaser of pharmaceuticals are the member states, which are free to adopt their own approach with respect to pricing and public reimbursement. Given the resulting price differentials between member states, parallel trade occurs as wholesalers take advantage of the arbitrage possibilities by exporting products from a low-price country to a high-price one and pocketing the margins. Having established this, the paper moves into reviewing the main strategies used by companies to counter such parallel trade. Such practices include refusal to deal/prohibition of exports, vertical integration, quota systems and dual pricing schemes. The paper identifies each strategy in turn,…